BlackBerry maker faces compensation prospects

Manama, October 13, 2011

BlackBerry maker Research In Motion faced the prospect of a compensation bill from network providers on Thursday as the world's dominant provider of mobile email struggled for a fourth day with service glitches.

RIM said services were starting to improve in all affected regions, reducing disruption for the millions of users hit by delays and outages.

But many in the telecoms industry believe significant damage has been done to a business that already has its share of trouble. They see a risk that this week's disruption will tip already restless BlackBerry users into the arms of rivals like Apple.

Meanwhile the company's service provider partners were looking at how compensation might be handled.

"We are reviewing our options in terms of compensation," said a spokesman for Britain's Vodafone , adding that "no decisions have been taken."

Spain's Telefonica said on its web site it would compensate customers, in line with Spanish law. Spanish Consumer Association FACUA estimated that clients will receive 0.23-1.90 euros ($0.31-$2.62) for each 24 hours of service interruption.

The Vodafone spokesman would not be drawn on whether such costs might be passed on to RIM, but analysts said there was little doubt operators would try.

"In the past there have been outages but they've been limited to an hour here and an hour there and the operators have been tempted to let that go," said Will Draper, analyst at Espirito Santo.

"They haven't been happy about it but it's not the kind of thing you go to court over. But this is completely different This is a three-day outage. This is 10 percent of your working month, so I'm pretty sure there will be compensation claims and I'm pretty sure they'll try and pass it on to RIM, but my feeling is it will be very difficult to make it stick."

RIM is unique among handset makers in that it compresses and encrypts data before pushing it to BlackBerry devices via carrier networks. Apple and other rivals rely on the carrier networks to handle all routing and delivery of content.

However other providers are breathing down RIM's neck with smarter handsets and copycat service provision.

Apple has started rolling out new version of its iOS software which includes BlackBerry-like iMessage service.

One analyst said BlackBerry is a victim of its own success in that the huge increase in usage over recent years has made its centralised network architecture vulnerable.

"This is the first major disruption to the BlackBerry service since 2009, during which time the number of BlackBerry users has doubled," said Nick Dillon, analyst at technology specialist consultants Ovum in a note ..."Despite the benefits the network brings in real-time delivery of email and data efficiency, it remains significant risk for the company.”

Services recover

RIM said BlackBerry services have improved significantly across Europe, the Middle East, Africa and India, the company said on Thursday, after a three-day global service outage hit millions of its customers.

“Service levels are also progressing well in the US, Canada and Latin America and we are seeing increased traffic throughput on most services, although there are still some delays and services levels may still vary amongst customers," RIM said in an update on its website.

The company, however, said it cannot give an estimated time for the full recovery of services around the world.

On Wednesday, the company said it would eventually deliver all delayed email and instant messages to customers in five continents affected by the outage, but later told some of its corporate clients that it may not clear the huge backlog of messages until Thursday morning on the US East Coast.

It apologized to customers in a statement on its Website and on its Facebook page.

The outage, the worst in about two years, adds to RIM's mounting problems, which include rising dissatisfaction with its co-chief executives and the company's inability to catch up with nimbler rivals like Apple. – Reuters